Multiple M&A Outcomes Possible For KBR

KBR inc (KBR) listed on the NYSE, an engineering and procurement group with a market cap $2.6bn, is said to be in the sights of Saipem S.p.A – one of the biggest oil & gas contractors in Italy. The other company seriously looking at KBR is Fluor Corp (FLR), a $6.6bn Texas based engineering player.

Also in the mix is Apollo, the private equity outfit, which is currently helping finance Saipem on the deal.The stock price of KBR is currently around $19, with the takeout price as high as $26 – $28 a share, depending on how competitive the bidding process may get. The recent trading update showed KBR delivering good earnings and growth, something which suggests it will not be sold on the cheap. The latest analyst projection is around $24 a share.

Moreover, the trajectory of a rising trend channel which can be drawn on the daily chart over the past year implies momentum towards $25 anyway – after the September Golden Cross between the 50 day and 200 day moving averages.

All three bidding parties are said to be weighing up their next move, with at least one already in discussion with KBR. The other two companies could step up to the plate at any time. However, there is also another scenario, in which Apollo Global Management LLC could help fund a bid in which all three companies could form a consortium. Each party could then cherry pick the asset of KBR they would like. All parties concerned are said to have appointed their own advisors. The next move here could be over the Thanksgiving weekend. For those who are concerned about such matters, advisers said to be involved are Credit Suisse and Goldman Sachs.

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